Paying College Players

Earlier we discussed the issue of paying college players.  We were lukewarm supporters of such a scheme but noted that the large number of low (we said non) revenue sports, existing regulations from NCAA and Title IX, and the wide variety of colleges make the details extraordinarily difficult.  An article from Andrew Beaton in the WSJ that followed up last year’s valuation of college basketball franchises based on the work of Ryan Brewer, an assistant professor of Finance sheds more data on the problem.  So does the annual report of the Athletic Department at the University of Wisconsin.

Brewer reports adjusted basketball revenue (we don’t have the original source) for Wisconsin of about $30 million in 2014.  The Wisconsin Annual Report shows total sports revenue of about $112 million including almost $38 in gift revenue for 2013-2014.  So basketball players (well, at least the starters) are exploited.  They are making a big profit for Wisconsin while almost all of the other 23 sports are not.

On the other hand, the whole Wisconsin Athletic Department with 24 sports only shows a very small surplus so a few sports are subsidizing many.   We might argue that some of the expenses are soft but the net surplus for the Wisconsin Athletic Department is listed as about a quarter of a million one year and about an eighth in another year.  It is a trivial amount considering the athletic department budget never mind the whole university.

Wisconsin has 24 sports.  Let’s say that is 600 players (100 in football and an average of little over 20 in the rest of the sports).  To provide a $10,000 stipend to each would cost $6 million.  You might be able to find $6 million in the Wisconsin budget by reallocating funds from employees to players but remember that Wisconsin is a top ten revenue producer in basketball and does well in football.  There are, according to Beaton, 351 Division One basketball teams.  Paying players is a big problem for lots of the teams.  That’s why we think the payment should come from the NCAA.

Still it is a lukewarm argument for paying college players.  There will be fewer players and fewer sports if we pay players.  On the other hand, the exploitation of the players in basketball, football, and a few other sports (for example, a few hockey teams) is a bigger concern so working towards a solution is a good idea.

 

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